Growers hope for best in Namoi sale as Dreyfus buys 2m cheap shares

The European-based agricultural commodities giant has grown its shareholding in Namoi Cotton by another one per cent, to just over 18pc, even though it only paid 67 cents a share.

Rival bidder and Queensland Cotton parent company, Olam Agri Holdings, has promised to pay 70c a share, prompting Namoi to officially reject the Louis Dreyfus bid earlier this month.

Yet, despite Namoi's recommendation, the owners of 14 parcels offloaded holdings ranging from 2400 to almost 546,000 shares in the fortnight prior to May 24 opting to cash in the profits already available to them.

Namoi directors have urged shareholders to wait for an independent expert's assessment of the higher Olam offer in the coming week before deciding what to do with their shares.

Meanwhile, shareholders and the cotton growers who use Namoi's ginning, classing and marketing services are watching with keen interest to see if the rebuffed LDC may lob yet another bid - a seventh in the bidding tug-of-war.

Growers have also watched the past three months of bids and counter bids, hoping the winning suitor keeps producers' operating needs top of mind when the takeover dust finally settles.

"As a grower, I'd actually be worried if the eventual winner pays too much," said NSW-Queensland border farmer and former Namoi director, Ben Coulton.

"It's important that the incoming owner can make the business pay for itself without needing to cut services to growers to save money.

"To grow cotton profitably we need good access to good gins."

He said if future ginning and related services were not "up to scratch" the cotton industry in NSW and Queensland could lose more regular growers, or current Namoi customers may even move to build their own ginning facilities.

Mr Coulton, at Boggabilla, suspected there may still be more bidding action ahead in the battle for Namoi.

However, after seeing the share price double from 35c last November, pushing Namoi's capitalisation value to about $145 million, he doubted either LDC or Singaporean-based Olam had the appetite to pay much more.

"They know this industry very well and know what they can afford to pay - I definitely don't expect the share price to double again," he said.

While conceding he was no expert, he felt a capitalisation value around $140m to $180m could be reasonable.

In the Upper Namoi Valley, Boggabri farmer and long-time Namoi Cotton customer, Andrew Watson, also wanted to see Namoi's solid grower relationships maintained under any new ownership regime.

"Namoi provides the full package, including a valuable brand reputation for us overseas - we certainly hope we'll continue to see the same level of service and connection with growers," he said.

"A lot of people are keeping a watching brief on the bidding activity, and I think most expect the sale to go ahead, but how it impacts competition and service at the grower level is always on our mind."

He noted the Australian Competition and Consumer Commission had identified potential reduced competition concerns around cotton classing services to growers.

LDC has told the ACCC it would willingly divest its 20pc stake in Goondiwindi-based cotton classing business, ProClass, if its bid for Namoi and its Australian Classing Service business was successful.

It would also quit its operation and management partnership role at WANT Cotton in the Northern Territory to allay competition concerns in northern Australia.

Growers have also anticipated QC could be under pressure to divest its similar stake in ProClass and some ginning assets, if it won the takeover tussle.

Mr Watson, Kilmarnock, said his family enjoyed a good relationship with both LDC and Queensland Cotton and expected to be comfortable with either as new Namoi owners.

Both were strongly committed to the industry already, and had a good understanding of Australian agriculture's frequent variabilities.

"Ag is tricky. Some years may not deliver the seasons and returns investors expect, especially with politics and natural resources issues having more impact these days," he said.

Olam or LDC were "probably preferable buyers" for Namoi than some newer or unknown player coming on the scene.

Mr Coulton believed grower syndicates may well emerge to buy any QC gin sites if Olam was forced to divest assets in order to win its bid.

"Ginning is an expensive business and obviously economies of scale help the bigger operators, but other gins have proven they can still operate independently," he said.

"It wouldn't be the first time a few growers have looked at having their own gin to guarantee the services they need for their crop."